Posted by Michael A. Kamperman on July 24, 2011
America has long been known as a two party democracy. Sometimes we have one party rule, but most of the time we have divided government like we do today. The debt limit debate has revealed this is no longer the case. We are now much more like a country with a parliamentary system where no one party of like minded politicians has a majority. These countries are ruled by coalitions usually unable to make difficult decisions unless absolutely forced to. Sound familiar? The rise of the Tea Party has moved the hard-libetarian-right from a small minority of the Republican Congressional Caucus to a large voting block with power. The Speaker cannot deliver his party without consent of this block. This has been the case for some time in the Democratic Congressional Caucus with the Progressive Coalition. Those not part of these two voting blocks are the moderates, some of which used to be considered as fairly liberal or fairly conservative, but those goal posts have now moved much farther from the center. What the debt-ceiling debate has revealed is the Republicans cannot deliver many votes unless spending cuts are large and revenue increases are minimal, even then they will lose a large chunk of the true Tea Partiers. However, the Democrats cannot deliver many votes to signficantly cut spending unless taxes are raised on the rich, and even then they will lose a large chunk of Progressives. So any “Grand Bargain” will need to come with votes from the middle and there are no longer enough people in the House of Representatives in the middle. The Tea Partiers and the Progressives together outnumber them. So any deal can no longer be “bi-partisan,” which is some for me and some for you. Any deal has to be tilted substantially to either the right of the left. With divided government that his a hard place to get to. So we now have a fractured government led by a President who doesn’t seem to have the skills to navigate such trecherous yet delicate terrain.
Of course no change is much better than the changes the two parties are negotiating. Raising taxes cuts jobs. Cutting spending cuts jobs. And, cutting jobs is the worst policies that can be passed in a middle of a jobs crisis. But in a weird twist no deal would shut down large segments of the government and crash the global economy. So a bad deal is better than no deal. It just goes to show how far we are from actually putting Humpty Dumpty back together again after the economy fell 0ff the wall.
What’s actually so silly about the whole debate of spending cuts versus tax increases is that most of the changes will come after 2012. Yet, after the elections of 2012 everything agreed to today can and probably will be changed. So to shut the government down over so little makes no sense. But that’s the rub. The Tea Partiers care more about their issues than common sense. And the Progressives care more about their issues than common sense. Are we really at the point where our government is about to lose touch with reason and common sense? Yes we are. The very fact we are not talking about jobs means Washington has already lost all sense of reason, since that’s the number one issue facing the country. Never mind that the whole debt limit debate is pointless because the U.S. debt is never a threat since we owe everyone dollars and we control the dollar. Stranger still, the only other industrialized nation to even have a debt ceiling is Denmark. We are arguing about something virtually no one else in the world even considers reasonable, which is a debt ceiling itself.
Posted by Michael A. Kamperman on July 12, 2011
http://www.newstalk1230.com/cc-common/mediaplayer/player.html?redir=yes&mps=TheShaneWarnerMorningShow.php&mid=http://a1135.g.akamai.net/f/1135/18227/1h/cchannel.download.akamai.com/18227/podcast/WACO-TX/KWTX-AM/The Shane Warner Morning Show 0714 8am.mp3?CPROG=PCAST&CPROG=RICHMEDIA&MARKET=WACO-TX&NG_FORMAT=&NG_ID=&OR_NEWSFORMAT=&OWNER=&SERVER_NAME=www.newstalk1230.com&SITE_ID=722&STATION_ID=KWTX-AM&TRACK=
I’ll be a guest on Waco News Talk 1230 AM on Thursday, July 14, @ 8 A.M. central time.
http://www.newstalk1230.com/main.html
My Sunday column in the Waco Tribune Herald was featured on the Shane Warner Moring Show on News Talk 1230 A.M. in Waco. The host talks about the article from the 7 to 13 minute mark in the 6 A.M. hour on Tuesday and from the 30 minute mark until the end of the program in the 8 A.M. hour (mislabled Monday).
http://www.newstalk1230.com/cc-common/podcast.html
Posted by Michael A. Kamperman on July 11, 2011
The following post was published in the Waco Tribune Herald on July 10, 2011.
In a Fourth of July guest column published in the Tribune-Herald and elsewhere, McLennan Community College history teacher Ashley Cruseturner suggested a “Grand Bargain” between Republicans and Democrats that would substantially raise taxes and significantly cut spending to bring the federal deficit into eventual balance, thereby preventing continuous increases in the level of federal debt.
At one point, Cruseturner says, “the United States is hurtling towards an unsustainable national debt debacle . . . we face an existential crisis.” Most people believe that this statement represents truth. However, what it actually represents is myth. According to Modern Monetary Theory, a sovereign nation like the United States that issues debt in its own currency can never become insolvent. Simply put, the United States federal government has the authority to print money any time it needs to. It can never run out of dollars.
Many people acknowledge this fact but argue that increasing the debt to “unsustainable” levels will lead to hyper-inflation and a collapse of the dollar against other currencies. They say we will wind up just like Greece. Despite three years in a row of trillion dollar-plus deficits and the Federal Reserve’s quantitative easing programs, these predictions have yet to become reality.
Unlike our country, Greece does not control its own currency because it adopted the euro. For Greece it is no different than being on the gold standard. Besides, Greece is not even the most indebted modern industrial country in the world. That honor belongs to the country economically most like us — Japan. It owes more than twice what we owe based on per-capita economic output.
Yet Japan has a strong currency. More importantly, Japan has the lowest interest rates in the world with its 10-year government bond yielding a scant 1 percent in interest. No one in the world is worried that Japan cannot or will not pay because Japan owes everyone yen.
What Cruseturner misses is that it is not the debt that represents a threat to our way of life. The threat comes from the medicine he proposes we take for an illness that doesn’t exist. His proposals are straight out of the 19th-century Austrian School of Economics that were wholeheartedly embraced and practiced by Herbert Hoover during the Great Depression. No post-World War II American government has practiced or proposed Hoover-style economics until now. The time to worry about balanced budgets and moral hazard is whenever the economy returns to full employment and is running on all cylinders.
Waco has one of the best Medicaid health clinics in the country in the Family Health Center. Not only is the clinic facing cuts from the state of Texas but now part of the “Grand Bargain” to raise the debt ceiling is cutting more of its funding at the federal level. This makes Waco weaker, not stronger. So does cutting teachers in our local school districts that struggle to educate disadvantaged children. All of these cuts are sold to us by both Democrats and Republicans as necessary based on a myth that is clearly false.
I live in the 21st century, and I do not want 19th-century medicine practiced on me. I also do not want 19th-century economics that similarly recommends cutting and bleeding as the way to make the weak stronger. Our parents and grandparents jettisoned this nonsense, and we need to jettison it too. The medicine we need to heal the economy is the opposite of what Cruseturner proposes. We actually need to lower taxes and increase spending to put the 25 million people in America who want a full-time job but cannot find one back to work.
We also need to fully fund Medicaid, keep our promises to everyone and put our teachers back in the classroom. Because the federal government has the money, the real moral hazard is to dismantle our society to satisfy the false prophets of a myth.
Mike Kamperman, who received his MBA from Baylor University, is president of Prometheus Wealth Management and author of “How America Can Escape the New Great Depression.” He formerly served as vice president of UBS Financial Services, formerly PaineWebber. He lives in McGregor.
Posted by Michael A. Kamperman on July 9, 2011
The unemployment report was abysmal rising to 9.2%. Of course they threw 271,000 people out of the labor force to keep the damage limited. Wages fell and temp0rary workers were let go. Temp workers are the first to get hired in an upturn and the first to get axed in a downturn. The report was before QE2 ended and before Medicaid aid to the states ended. We won’t have those boosters in July. The economy needs a major job boosting stimulus plan and the one with the best chance to pass is a payroll tax cut. We should exempt the first $20,000 in wages from Social Security and Medicare taxes on both the employee and the employer. This would put an extra $125 per month in the hands of all workers earning $20,000 or more. It would cost $300 plus billion to enact. But because employers get it too it would lower their payroll costs freeing up some money for raises and new workers. Importantly, the tax break is only for U.S. workers paying into Social Security and Medicare. Global corporations would not get the tax cut on the jobs they shipped overseas. More importantly, this tax cut would really help small business who hire U.S. workers almost exclusively. This would not create 25 million new jobs, but it would create 3 to 4 million new jobs and that’s a start.
The jobs created by this tax cut would for the most part not be the highly skilled great paying jobs. Those workers and employers don’t really need that much help. But the employees and employers of semi-skilled jobs are the one’s that really need the help. Currently, if one has a college degree and is 25 or over the unemployment rate is 4.4%. For a person 25 or over with a high school diploma and no college the unemplyment rate is 10%. For those with less than a high school diploma the unemployment rate is 14.1%. That doesn’t count the under-employed. All the talk about training people for hard to fill jobs like bio-engineering is a joke when the vast majority of the unemployed have not graduated from High School. We don’t have a structural jobs issue, we have a macro-demand issue.
The $300 plus billion price tag is static, not dynamic. Some of the jobs created will pay more than $20,000 and will contribute both FICA and Income taxes to the Treasury. Many of these jobs will go to people currently receiving unemployment benefits, supplemental nutritional assistance, housing assistance, and Medicaid resulting in enormous savings for all levels of government. Plus, the boost to the economy would increase profits for businesses who pay taxes. Employment has been the backbone of America since people started moving off the farms enmasse 100 hundred years ago. We are not close to coming up with a new system to structure society around. So we better get the old one going again and that means jobs.
